I've written a lot about co-creation over the past 9 months, demonstrating how it helps consumer product strategy (CPS) professionals develop better products. A majority of companies are not yet using social technologies to involve consumers in the product development process, but that will soon change. We expect an increasing number of companies to move from the education phase into the experimental phase in 2011 and 2012 -- or risk being left behind while their competitors move forward. Why do we expect co-creation to take off over the next two years? The research provides a compelling case:

CPS pros recognize the value of co-creation. Even though uptake is far from ubiquitous today, CPS pros recognize the transformative properties of co-creation. Seventy-two percent of product strategy professionals believe social technologies will enhance their existing capabilities of using customer input to shape product strategy.

There’s been a lot of buzz (some positive and not so positive!) about comments I have made about the current state of the digital music market in The New York Times and at Midem.

The quote that really grabbed the attention was “As Things Stand Now, Digital Music Has Failed.”

The problem with a quote like that, of course, is that it can mean many things to many people without further context, so here’s the additional context I gave around this in my Midem speech:

Digital music is at an impasse. Digital music has failed to reach its three key objectives:

1 – To offset the impact of declining CD sales.

2 – To generate a format replacement cycle.

3 - To compete effectively with piracy.

With music’s first digital decade behind us, we’re still trying to define a role for mobile; we’re still waiting for a 99-cent download market to emerge outside of iTunes; we’re still waiting for 9.99 subscriptions to break out of a niche; we’re still trying to work out how to make the economics of ad-supported add up; we’re still waiting for piracy to decline; we’re still watching recorded music revenues decline; and we’ve still got CDs as the bedrock of music sales.

The simple fact is that current music products do not meet consumer demand, and the divergence between emerging consumer behavior and legitimate music products is widening at an alarming rate.

In 2005, I warned that the fuse had been lit on a demographic time bomb for music product strategy, that young consumers were growing up without any concept of music as a paid-for commodity and were unlikely to ever start paying for it unless the music industry met their needs. Now the effects are keenly felt. Revenues are tumbling, and digital music's growth is stalling, highlighting the diminishing relevance of current music products. Efforts zeroed in on converting thirtysomething CD buyers to digital downloads and winning over file-sharing Millennials (16- to 24-year-olds), and with only modest success.

The byproduct of this strategy was to leave the Digital Natives (12- to 15-year-olds) uncatered for, so that now a second generation of music fans is following the Millennials out of the music-buying marketplace. So, while the Millennials' demographic time bomb blows up in the record labels' faces, the fuse has just been lit on another. A radical shift in music product strategy is the only feasible defense.

As the canary in the mine for media businesses more broadly, the experience of music companies presents lessons for product strategists across all content genres.

"Though they’re unlikely to admit it, the mainstream social networking race against Facebook is as good as over. By contrast they remain the No. 1 destination for artist communities online, yet without a major reinvention they’ll start to feel the competitive pressure bite there also."

The major reinvention came far too late, and it was too little.

Ironically, even though MySpace let basic usability and functionality stutter, artists stuck with it because that’s where their audiences were. A host of much more competitive and differentiated alternatives came to the fore, focusing on subsets of the broader MySpace music value proposition. Sites like Sellaband, Bandcamp, SoundCloud, and PledgeMusic each have very different value propositions, but all took from MySpace the baton of developing the artist-fan relationship and ran with it.

HMV is a victim of the Media Meltdown. Consumers are falling out of love with physical media products and unfortunately are not yet anywhere close to entering into whirlwind romances with premium digital products. The net result is declining sales across massive swathes of HMV’s product portfolio.

Of course consumers still love media. They’re even paying for a lot of it (e.g., Pay TV). But the Media Meltdown loosened the monopoly of control enjoyed by media companies and retailers. We are currently in the midst of a painful transition, and we don’t yet have a set of next-generation media products that consumers will pay for on the scale they paid for physical products.

It may be that people will never pay directly for media products in such numbers ever again. It’s certain the media retailers will have a vastly diminished role to play on the high street and in the mall. If they want to be major players digitally they have to reinvent themselves as content destinations rather than just digital retailers. Selling digital downloads of content is a temporary fix. A third way is required.